Traditional IRAs are a popular choice for individuals looking to either save for retirement or protect existing retirement savings from unnecessary taxation.
Why consider a Traditional IRA?
Income tax deduction - You may be eligible to make contributions that will qualify for an income tax deduction.
Tax-deferred growth - Earning will grow tax-deferred until a withdrawal is distributed from the IRA.
Possible income tax credit - Individuals may qualify for an income tax credit based on the amount of their Traditional IRA contribution.
- Control - You control the timing and amount of any contributions.
Protect existing retirement savings - A Traditional IRA may receive amounts from other retirement plans, such as a 401(k) plan, and keep the money growing tax-deferred.
Traditional IRA Contribution Limits
The annual contribution limit is a combined limit that applies to all of the Traditional IRAs and Roth IRAs held by an individual. Contributions to an IRA cannot exceed the amount of earned income received during the year. Contributions cannot be made to a Traditional IRA during or after the year you attain age 70½. The deadline for making a contribution for the previous tax year is your tax-filing deadline (usually April 15) and does not include any extensions.
Qualifying for Tax-Deductible Contributions
If an individual (and their spouse if applicable) does not participate in an employer-sponsored qualified retirement plan, the individual should be eligible for a full income tax deduction. The ability to deduct a Traditional IRA contribution may be reduced if you (or your spouse if applicable) participate in an employer-sponsored qualified retirement plan and your income exceeds certain limits.
Individuals participating in an employer-sponsored qualified retirement plan
If your tax-filing status is single or head of household:
|$61,000 or less
||$60,000 or less
|Between $61,000 and $71,000
||Between $60,000 and $70,000
|$71,000 or more
||$70,000 or more
If your tax-filing status is married filing jointly or qualifying widow(er):
|$98,000 or less
||$96,000 or less
|Between $98,000 and $118,000
||Between $96,000 and $116,000
|$118,000 or more
||$116,000 or more
If your tax-filing status is married filing jointly and your spouse participates in an employer-sponsored qualified retirement plan while you do not, you may qualify for an income tax-deduction based on the following limits:
|$183,000 or less
||$181,000 or less
|Between $183,000 and $193,000
||Between $181,000 and $191,000
|$193,000 or more
||$191,000 or more
Traditional IRA Withdrawals
Withdrawals are taxed as ordinary income.
An additional 10 percent penalty may be imposed by the IRS if you receive a withdrawal before you reach the age of 59½.
Exceptions to the 10 percent penalty include: attain the age of 59½, qualified educational expenses, qualified first-time homebuyer ($10,000 lifetime limit), death, disability, substantially equal periodic payments, qualifying unreimbursed medical expenses, and qualifying medical insurance premiums if you are unemployed during the year.
Securities offered through MWA Financial Services Inc., a wholly owned subsidiary of Modern Woodmen of America, 1701 1st Avenue, Rock Island, IL 61201, 309-558-3100. Member: , . Products are available in most states. Individual representatives may not be licensed to sell all products.
Although Modern Woodmen of America does not charge an annual fee on IRAs, management and other fees associated with certain investments may still be charged.